Cisco Systems is well positioned to capitalize on the opportunity in artificial intelligence (AI) to revive sales growth.
“Cisco is off to a strong start to fiscal 2025,” he said. “Our customers are investing in critical infrastructure to prepare for AI, and with the breadth of our portfolio, we are uniquely positioned to capitalize on this opportunity.”
This message sounds like a replay of the previous quarter’s message.
“We delivered a strong close to fiscal 2024,” Robbins said then. “In our fourth quarter, we saw steady customer demand with order growth across the business as customers rely on Cisco to connect and protect all aspects of their organizations in the era of AI.”
GAAP EPS (generally accepted accounting principles/earnings per share) came at $0.68 for the first quarter of 2025, down 18 percent from a year earlier, following a 44 percent annual decline in the previous quarter.
On the other hand, the company sees strong product orders, up 20 percent from a year earlier as demand normalizes. This is an acceleration from 14 percent in the previous quarter. In addition, the GAAP gross margin came at 65.9 percent, and the non-GAAP gross margin was at 69.3 percent above the company’s guidance.
“Revenue, gross margin and EPS in the first quarter were at the high end or above our guidance range, generating strong operating leverage,” said Scott Herren, CFO of Cisco. “We are focused on solid execution and operating discipline while making strategic investments to drive innovation and growth.”
After descending from its old glory days, Cisco’s growth has been on a roller coaster in the last decade. From mid-2019 to early 2021, the Silicon Valley-based company experienced revenue declines due to “creative destruction”—getting rid of its old low-growth products and moving resources into new high-growth products.
Wall Street has yet to be convinced that Cisco’s creative destruction will help the network pioneer regain its former glory. For the past five years, the company’s shares have been up 28.20 percent, compared to a 91 percent gain in the benchmark S&P 500 Index.
Still, investment analysts and industry experts agree with Cisco’s management that AI allows the tech giant to revive growth.
Maxim Manturov, head of investment research at Freedom24, sees a silver lining in the company’s guidance.
“Despite sales declines, Cisco raised its full-year revenue forecast to between $55.3 billion and $56.3 billion and increased its earnings per share projection to $2.26 to $2.38,” he told The Epoch Times in an email. “This adjustment follows the company’s strategic pivot toward higher-growth sectors, involving a 7 percent workforce reduction.”
Manturov sees Cisco’s recent push into the AI server market using Nvidia chips as evidence that the company is entering the AI space. This move positions Cisco to capitalize on enterprise IT infrastructure updates centered on AI.
In addition, he believes Cisco’s $28 billion acquisition of cybersecurity firm Splunk will enhance its software business and cybersecurity capabilities.
“These moves indicate Cisco’s commitment to transforming its business model by growing recurring revenue and focusing on innovation in high-growth areas.,” he said.
“They’re also keeping a close eye on operational discipline, keeping costs under control, and continuing to innovate where they can,” he told The Epoch Times via email.
Nonetheless, Khan sees the revenue decline and profitability challenges as a sign that Cisco still faces some headwinds, especially in certain product areas. In addition, he believes that the impact of the Splunk acquisition has yet to materialize fully, so the company may not see the benefits from this strategic move for quite some time.
“Overall, Cisco seems to be doing well in positioning itself for growth, especially with AI infrastructure being a big driver,” Khan said. “But they’ve got some work to do in stabilizing revenue and improving profitability in the short term. If the market continues to lean into AI, Cisco could be in a good spot for the rest of the year.”
Sidharth Ramsinghaney, director of strategy and operations with cloud communications company Twilio, sees Cisco’s first-quarter results as demonstrating both resilience and challenges in its transformation journey.
“While the 6 percent revenue decline is concerning, their ability to deliver 69.3 percent gross margins—the highest in two decades—shows strong operational execution and pricing power in core markets,” he told The Epoch Times in an email.
Meanwhile, given the market opportunity, he sees Cisco’s $1 billion AI order target for fiscal year 2025 as conservative.
“They’re playing it safe, but this could mean leaving growth on the table in a rapidly evolving AI infrastructure market,” he said.
Ramsinghaney believes Cisco’s $40 billion remaining performance obligation, which combines deferred revenue and backlog, including unbilled revenue, and improved fiscal year 2025 guidance suggest management’s confidence in its transformation.
“However, the key will be accelerating growth in core networking while scaling new initiatives in AI, security, and observability,” he said. “The following 12–18 months will be crucial in proving its ability to execute this dual mandate.”
